Security First Victimized in Web Stock Selloff

Despite Security First Technologies Corp.'s especially strong performance in the second quarter, investors continued selling off its shares.

The Internet banking software company's stock closed Friday at $30, down 14% last week and off 62% from its April 22 high of $79.25.

Investors have been selling off their holdings in the Internet sector amid fears of rising interest rates, said Stephen C. Franco, an analyst at U.S. Bancorp Piper Jaffray. Stocks in the financial sector have also been hit hard in recent weeks.

Companies such as Security First, Cybercash Inc., Sanchez Computer Associates, and Checkfree Holdings Corp. "kind of get the double whammy of being Internet stocks in the financial services world," Mr. Franco said. "They get hit twice as hard."

Cybercash's stock fell 11% for the week, to $9.25 down 63% from its 52- week high; Checkfree fell 15%, 64% lower than its annual high, and Sanchez lost 14%, down 25% from its high.

On Thursday, Cybercash issued a press release saying there was "no reason related to its business operations that would warrant the decline" in its stock price.

"Cybercash's payment business remains strong," said William Melton, chairman and chief executive officer.

Atlanta-based Security First reported robust revenues of $15.7 million, up 245% from the same quarter a year earlier. The net loss from continuing operations narrowed to $2.2 million, compared with a loss of $8.1 million in the same quarter a year earlier.

The company lost 8 cents a share, compared with analysts' expectations of an 11-cent loss, according to the consensus estimate tracked by First Call.

"The numbers were a lot stronger than what most people were looking for," said Charles Wittmann, an analyst at First Union Capital Markets.

Security First's pending acquisitions of Edify Corp. and FICs Group NV are promising, he said. These deals would make Security First the only supplier of Internet banking software to large banks.

Still, Mr. Wittmann eased back his stock rating to "outperform," from "buy," reflecting the risks of merging three companies.

He said Security First may also struggle in keeping up with demand for its software, which has been sold to 100 financial institutions.

Thirty additional software deals are in various stages of progress.

"It could fall behind in rolling out an Internet banking solution, causing other banks to sit back further in the queue," Mr. Wittmann said.

Internet banking software is gaining a higher profile as big banks begin to offer the service and pour money into marketing it.

WingspanBank.com, the new direct bank launched by Bank One Corp.'s First USA subsidiary, is already aggressively marketing its wares, said James S. Mahan 3d, chief executive officer of Security First.

"I think bankers are starting to get it," said Mr. Mahan during a conference call to discuss second-quarter earnings.

"When you have a brand name like Wingspan throwing $150 million of marketing dollars at it, it is going to raise the bar for the rest of the crowd."

Another major Security First customer will soon launch a $125 million marketing campaign for its direct bank, Mr. Mahan said.

Mr. Franco said he believes the undisclosed bank to be Citigroup's Citibank unit, a Security First customer and strategic investor. The e-Citi direct banking initiative is expected to be launched within the next two weeks, Mr. Franco said.

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